Sunday, March 23, 2008

Economic illiteracy

Wow! I mean, seriously, wow! I have read some incredible loads of old shit over the last few years (and I've written a few), but I think that this Conservative Home article by Tony "Commander" Makara might actually be the single most stupid piece of crap that I have ever read.

Well, for a start we in Britain should stop importing goods that we can produce for ourselves. Why are we importing microwave ovens from Russia, radios from China? We can make such items here, the production of such items would create jobs, that would mean the people rotting away on benefit would no longer be on benefit, they would be working and actually contributing to the nation through tax rather than taking from the nation by being on benefit. They would also be earning money which they would spend to buy other British made goods and the wealth generated would stay in Britain rather than flowing out of the country to benefit another nation.

Already we can see that producing for our domestic market, that is having a home-market economic policy, has many advantages. The cheap Chinese radio may no longer be available but in its place we have people working, people no longer on benefit, people spending money that stays in Britain, money that British producers can use to re-invest.

Now indeed, it is true that if we were to reduce significantly imports we could both reduce unemployment and increase home production. At first, that is. But if we were to do so then we would also start to get second order effects: like fewer foreigners buying our own products and thus raising unemployment again, this happening simply because we are sending fewer pounds out there into the global economy for them to buy such products with. It also seems perilously close to the idea that production is the reason and justification for production, which it isn't. As Adam Smith pointed out, the argument in favour of all production is consumption. The unavaibility of that Chinese radio and its replacement by a more expensive British one does indeed raise home production, but it lowers consumption, which isn't the point of the process at all.

Two more points, the first historical. It was precisely this line of thinking which created the trade crisis of the 1930s, when nation after nation placed tit for tat punishing tariffs on the exports of other countries. Now Makara's plan would require the UK to place heavy such tariffs upon imports, for the individual consumer would rationally be looking to buy the cheaper, foreign made goods. This would invite retaliation (however silly it would be) and make the entire world poorer. I would hope that no one puts forward the 1930s as an economic model to emulate, rather than the correct usage of that history, as one to avoid?

The second is by analogy. Again, as Adam Smith put it, as goes household economy, so that of the nation. It makes sense for the household to purchase those things from outside it that are cheaper than they can be produced within the household. My favourite example is wheat: we all have at least a windowbox, if not a lawn. We could grow some, if not all of our own wheat, thresh it, mill it and then bake our own bread or make our own pasta (for those on the healthier diets). But even to state it in these terms is to show how ridiculous the idea is: we all know that it is vastly cheaper to pay the supermarket a pound or two for bread each day than it is to go through that year long backbreaking labour, even if we do have the half acre of lawn that can be ploughed to feed the household. To pay for our imports from the supermarket we export from the household, almost all of us our labour.

And yes, we could have all of the children throwing stones at the rats, mother could be occupied with the spinning wheel all day and long into the evening to clothe the family: we could indeed make certain that not a moment of household time is not used in labour to support that household. Yet it's usually taken as a sign of civilisation, of our wealth, that we don't in fact have to do that, that we import such things into the household from outside it.

If we accept this line of reasoning about the household (and I agree that there are certain deep green types who don't actually accept this line of thought at all: they're the ones clothed in knitted tofu and chowing down on home made yurts), that it is the imports which make us rich, then we must also accept it for the nation.

For once you've accepted the idea of voluntary exchange (and the consequent beneficial effects of the division and specialisation of labour) then the only thing left to do is to define the extent of the market. And there's absolutely nothing, nothing at all, which says that the limit should be the household, town, county, tribe, nation, region or continent.

As Timmy points out, our only current natural trading limit is the entire globe. As transport costs have become cheaper and more available, we have traded more and more across thousands of miles. We call this process globalisation and it is steadily making us all richer.

Tim Worstall, you know perfectly well that the economic conditions of the 1930s were a unique phenomena and bear no relation to today. Furthermore the economic strategy I advocate would benefit all nations. Self-sufficency is a good thing and leads to greater economic security. You have to understand that the era of globalization is about to end. Many in the United States are now openly questioning the globalist ideology and this sentiment can only grow.

That's right, chaps; despite the fact that travel has become cheaper and easier than ever before, despite the fact that communications are more integrated and comprehensive than ever before, "the era of globalisation is about to end".

Tony Makara: you are a fucking moron.

The only thing that is likely to end the "era of globalisation" is if we deliberately attempt to do so through ridiculous and pointless caps on carbon emissions. That would fuck us up pretty badly but we are, in this case, our own worst enemy.

The only people in the US who have doubts about globalisation are those who, like Tony Makara, still inhabit a deeply-outdated mercantilist mind-set. That there are total fucking morons inhabiting the US as well as Conservative Home doesn't mean that we have to give them a platform.

Apart from anything else, Makara argues that benefits cost us money. Well, yes, social security payments cost some £120 billion every year. But our GDP—which is value added to our economy—is over a trillion pounds a year.

Essentially, Tony Makara is advocating that we wind our entire economic system back to the fucking Dark Ages in order to suit the least productive in our society. That's unbelievably stupid.

'Government must play its part in offering support for entrepreneurs who wish to produce for the domestic market.'

'Those of you free-traders who love the cheap foreign goods are going to have your faith severely tested when our currency goes into decline and you cannot shift your purchasing power over to buying British goods because the British goods are not being made anymore.'

Such astonishing, genuinely ignorant views are commonly held by the Labheads and Libheads and all we can hope for is that a decent percentage of the time a government with some understanding of economic reality is in power. Lets hope that this fool isn't typical of a changing mindset amongst the Tories, otherwise Britain really is fucked. Thankfully he gets the kicking in the comments (if not elsewehere) that he deserves.

The rest of you are making a fucking big assumption - you're assuming an indefinite cheap and plentiful supply of fuel.

And so much other stuff that it'd take a small book to go through it. Compared to what's coming we live in a benign and co-operative world.

I'm probably old enough that I'll be dead before the real shit hits the fan, but I suggest you younger people learn to fight (with guns), and learn to hunt your own meat (and dress it - the shitty bit), and learn to grow your own veg. A useful technical or agricultural skill wouldn't go amiss either. Who's going to pay good money to web designers when everything turns to shit?

The basic problem is too many human beings on this planet - including too many in this country.

If you've got money to spare, by good arable land well away from any city.

Presumably, this fuckwit works for the 'trade promotion' part of the Dept of Timewasting & Interfering (now apparently known as 'BERR'); or perhaps the CAP-supporters at DEFRA... No doubt, Sir Henry too...

Perhaps they should ask the people of near-autarkies such as North Korea or Cuba how well their lives are going? Or look at the wonderful success import-substitution policies had in impoverishing the poor in Latin America and India...

BTW, imports also have dynamic economic benefits, e.g. by creating extra competition, and thereby increasing the productivity of UK firms. So it's not all about consumption... That's why it's logical to open our markets, even if other countries don't open theirs.

I suppose it depends how he plans to stop importing goods that we can produce for ourselves.

Slapping on tariffs or giving subsidies makes little economic sense as it is better to take advantage of those goods they can make more cheaply while selling them the goods/services we can produce. There will always be such goods and services when you think about it, it is impossible for one side to monopolise all production.

On the other hand, maybe encouraging our producers by lower taxes and not lumbering them with ever more social responsibilities that our competitors do not have might not be a bad idea.

Let's take your argument about fuel (which I happen to think is wrong, but that's by the by) to its logical conclusion.

If fuel becomes scarce, transportation will obviously become more expensive. At some point, if this continues, home production will become the cheaper option and thus will take over from imports quite naturally. WITHOUT THE INTERVENTION OF POLITICIANS.

Actually what we need is more globalisation. To give you an interesting example: I was chatting to a farmer chum of mine this weekend. His business is table grapes. For the past few years he and his colleagues have lived under the tyrany of the Tescos buyers. But things are changing. This year, when he was getting his annual buttfucking from Mr Tesco, he simply went on the internet and found a buyer in Russia, of all places, prepared to pay about 30% more for his grapes.

This radical change in his circumstances has come about thanks to two things: firstly the local farmers are fed up with being screwed and are turning to technology to help themselves. But more importantly, the power of a few large groups from Western Europe (Tescos, Sainsburys and Carrefour) is being diluted as other retailers around the world are learning they can copy the supermarket chain model.

So if your table grapes are a bit more expensive this year, don't blame the farmers. It's Ivan and his aspirational wife in Semipalatinsk (made wealthy by selling microwaves to you) who've made your dinner party a little less enjoyable.

But don't worry. My farmer chums now have more money as well. He's thinking about taking his first ever overseas holiday....to Britain.

There are several problems I have with globalism. Certain industries such as food production I believe it is preferable to have restrictions on for the sake of national security; and also I feel that a world economy requires free travel of workers, which I oppose for several reasons.

Also, the cash cost of working age benefits is considerably less than £120 bn per annum. About half of that total is old age pensions. It is the social cost of the welfare system that we should worry about - the fact that single young women are financially motivated to have kids; the fact that many people are better off not working; and so on.

People on the dole aren't not working because Tony Makara and his ilk haven't imposed massive import restrictions, they're not working because of the benefit trap.

anonymous said "Certain industries such as food production I believe it is preferable to have restrictions on for the sake of national security"

Few would argue that emergency planning (including threats to national security) is a legitimate function of the state. But that doesn't mean we need to restrict trade in food. There are two threats to Britain's food security.First, a transportation embargo imposed upon us by a foreign power.Second, food exporting nations stop permitting exports to Britain.

Both these threats are almost non-existant in the forseeable future. It would be wise to stay alert to such a threat becoming realistic over time, but it would be foolish to deny ourselves the benefits of trade because in the distant future it is theoretically conceivable that they may be threatened.

Why on earth should we desist from importing mangoes and bananas now because in 30 years time we can't be 100% sure that, say, China won't start blowing up our container ships? Nuts!

"and also I feel that a world economy requires free travel of workers, which I oppose for several reasons."

Why exactly is immigration necessary in order for me to eat imported foods or buy an imported television?

Personally, I'm not optimistic. We'll be back to building tea clipper type ships before we're done.

And I too am thinking in terms of national security when I say we should make our own kit and grow our own food. What would we do if the whole world got tired of us launching illegal wars and imposed total sanctions next year, or whenever - for example. Or if we were entirely cut off from Europe due to war, as has happened in living memory. Not possible? Don't bet on it.

But anyway - we'll see, or at least, you will. I'm not expecting any of the shit to hit within my lifetime (but it might). When it does hit the fan, you wont be able to use money to pay people like me to again do your fighting, hunting, farming, fixing your house, making stuff, for you because cash will be worthless. Can't exactly eat it or keep warm with it unless you burn it.

We needn't neccessarily BE self-sufficient - just have the capacity to be so if and when it becomes neccessary.

He is an irritating bastard--not because he "has hit free marketers where it hurts" but because he keeps coming back again and again and shoving the same mind-boggling stupidity back into your face.The only meaningful debate anyone could have with this idiot would need to be conducted out on the pavement. Whay a twat!!!

I see the core problem as numbers - human numbers. There are just too many of us. To take it to an extreme just by way of illustration: if there were only 5 million of us worldwide we could all have a Humvee each and there still wouldn't be an oil problem. Or any other resource problem either. But 6.5 billion and rising ...

You give an example which you claim is taking it to the 'extreme'. But we have already surpassed the 6.5 billion mark and best estimates give a likely maximum human population of around 9 billion in the second half of this century. So, in really taking your example to the extreme: what raw material that goes into the making of Humvees do you think we are in imminent danger of running out? It is certainly not fuels by which they are run.

I presume unintentionally you undermine your own argument with your last post. "Personally, I'm not optimistic. We'll be back to building tea clipper type ships before we're done."

The clippers did bring a luxury commodity to Britain from China, that is true, but they also brought grain from Australia (see The Last Grain Race by Eric Newby).

Britain has been unable to feed herself since about the end of the 19th Century. During that time we have gone through two major wars during which incoming trade was threatened. Although there were some tight moments, Britain never starved.

If you really are worried about food security, might I suggest your efforts were concentrated on campaigning for a bigger and more effective Royal Navy? Although I don't have the numbers to hand, I would guess that even tripling the Navy Estimates would be cheaper than trying to subsidise domestic food production.

The only way to get sustainable food or any other security is to have a population that can be sustained indefinitely from your own resources. No matter how big a navy we build, America, Russia, India, China can build bigger.

That is certinle less than half the current 60 million in this country, and far less than 6.5 billion (or whatever the proper, higher, number is - ask cookie: he seems to know better) worldwide.

Think of the planet as a giant Petrie dish. Or is cookie going to get all literal with me on that too?

"The only way to get sustainable food or any other security is to have a population that can be sustained indefinitely from your own resources. No matter how big a navy we build, America, Russia, India, China can build bigger.

This is insane. Suppose we butchered our population down to a 'sustainable' level. Now who is to say our land wouldn't be ruined by a chemical or nuclear attack from America, China etc etc? Then what? Mad? Of course. Any more mad than the assumption that America, China etc might want to attack food trading ships to disrupt our food supplies? No. As mad as talk of restricting trade so that it can't be disrupted in future by such attacks? Not nearly as barking!

"if there were only 5 million of us worldwide we could all have a Humvee each and there still wouldn't be an oil problem"

Who would make the "HumVees"? In fact, who would be the doctors, engineers, etc etc? Five million people world-wide could never support an economy large and diverse enough to provide even the basics of modern civilisation:

Sanitation - who is going to flush the turds away? Sewers are designed according to the size of the population, and require a certain "throughput" of water to clean them. A population under half a million in Britain (a generous proportion of the five million world wide pop) wouldn't provide that.

Water - Who will run the reservoirs, the purification plants, the water distribution infrastructure? If the population was reasonably distributed around the country, how could we econommically support the sort of water system we currently have?

Ditto electricity and gas. Ditto healthcare.

In fact, a world with a population of five million would regress three centuries in three decades.